United States: Why the US Economy is Screwed

Is the US Economy screwed? In some ways, yes. Here are some of the reasons why the US economy is still screwed (which is by no means exhaustive), which should make you feel worried. However, if you think these are too depressing, you can well check out here for the reasons why the US economy is on the right track.

1. Housing Market is still weak

Needless to say, housing remains to be one of the weakest links, which is not really recovering. S&P/Case-Shiller indices are still going downward, and quantitative easing isn't helping as mortgage rates are rising.

Source: Standard & Poors

2. Job Market is still weak

Whether the US job market is doing fine depends on how you read the data. The worrying aspect of the job market is that Labour force participation rate is down, lowest since the 1980s. That signals that people are dropping out of the labour force, so they are stopped being counted as unemployed.

On the other hand, as food and energy prices have gone up (for what ever reasons you like). Although CPI inflation is still low, which probably means that prices are not really going up much as far as consumers are concerned, manufacturers are definitely feeling the increase in input prices. Sooner or later, either profit margins will be squeezed, or manufacturers have to pass cost to consumers. The result: high inflation, at least as far as the headline inflation numbers are concerned.

Source: Institute for Supply Management, St. Louis Fed

If all these sound impossible to believe, you are an optimist, such that you believe the US economy is really on the right track. If you think that the US economy is doomed, however, you might want some alternative data on why the US economy is on a right track to neutralise your depressed mood.